It is almost 18 months since responsibility for the implementation of the federal government's policy on IT infrastructure outsourcing with Centrelink was devolved to its statutory board. In the four years of IT infrastructure market testing preceding that decision, Centrelink discovered a lot about its own operations. We identified the range of services being offered to the market and the level of current service delivery and associated costs, and updated these regularly to ensure currency. During this period, we also achieved efficiencies of $55 million while maintaining appropriate service levels in infrastructure services.
This process of rigorous analysis also highlighted the range of risks in an outsourcing environment. Of greatest focus were those risks related to business continuity, the maintenance of capability for the same delivery costs and support for the vast change management program.
The board, in assessing the options available, decided that a strategic sourcing approach was the optimum method to respond to the government's outsourcing policy, to acquire new capability and to achieve organisational efficiencies - an approach that expanded upon the original scope of the policy by encompassing all I&T operations for consideration of sourcing services and products from the market. This approach was recognised as a key enabler to the achievement of Centrelink I&T ambitions, as articulated in the Digital Business Strategy (DBS).
The DBS is the blueprint of Centrelink's future for both business imperative and technology enablers. As it sets out, the dramatic changes in technology and accessing the high-level skills required to meet the challenge, especially when moving to the uncharted waters of cross-agency networks, were of significant focus and risk.
The adoption of strategic sourcing is a key strategy for managing such risks. It provides the tools for clear assessment of the options to access services and products and their ultimate deployment that can best support the building of future capability.
Part of the strengthened focus has increased attention on the mechanisms for dealing with the industry. This has involved a range of activities, including:
- Exploiting Centrelink's market power by systematically focusing on the terms, conditions and utilisation of mainframe software licences in order to generate savings in the order of $3 million a year. Centrelink is hopeful of similar success with respect to Unix software licensing arrangements.
- Reassessing the application of the Commonwealth's intellectual property framework. Centrelink's approach here is to incorporate the identification and valuation of its intellectual property into the strategic sourcing processes.
- Reviewing individual project approaches to market with an aim of combining projects where timing and functionality synergies exist and sensible work packages can be created.
- Revising tender and contract templates so industry receives a clearer statement of Centrelink's business requirements in order to encourage innovative business, technical and contractual solutions.
- Coordinating planning across I&T strategy and planning enterprise architecture. Strategic sourcing helps to identify strategic opportunities for combining needs and streamlining and delivering solutions. One example - the pressure to replace Centrelink's 28,000 PCs was immense. The contract now includes a clause that enables the pursuit of managed desktop services.
- Developing a dynamic model that matches the most appropriate sourcing options to the type of relationship required. For example, procurement in the form of contract management does not require knowledge of how a product is made. At the other end of the scale is collaboration in the form of partnerships that depend on information sharing to achieve a product or service that benefits all parties.
- Establishing business panel arrangements to facilitate timely and appropriate access to business and technology services and support to assist ongoing Centrelink activities. The panel will also enable access to information and analysis to help in future service design and development.
- Establishing new and innovative partnerships with organisations to develop capability. Examples are the provisioning of e-business functions between Centrelink and community providers through a number of technology providers and vendors.
The December 2001 briefing for all existing vendors went some way to helping companies understand our environment and expectations, and also explained the intricacies of the DBS and how strategic sourcing would be utilised, not only to provide cost-effective solutions but also to build capability over the coming years.
An interesting by-product of the industry briefing has been the expansion of communication between companies who are keen to maintain or provide future business to Centrelink. Businesses are already beginning to explore the nature of services required by Centrelink and are creating discussion between themselves on how best they might partner and bring new capabilities and solutions to Centrelink for consideration.
Centrelink believes bringing greater rigour to its strategic sourcing activities will assist with the development of partnerships with industry because Centrelink will be able to better articulate its expectations and be more informed in committing to, and managing, such relationships.
- Jane Treadwell is Centrelink Chief Information Officer.
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